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NOTES 2015

The equity investment in any one enterprise, whether allied or

BANKING SHORTLISTED QUESTIONS 1 non-allied, shall not exceed 25% of the net worth of the bank
Net Worth the total of the unimpaired paid in capital
Q: What is the preamble of R.A. 8291 or the General Banking law of 2000? including paid-in surplus, retained earnings and undivided
Under Section 2, Declaration of Policy: profit, net valuation reserves and other adjustment as may be
o The State recognizes the vital role of banks providing an environment required by the BSP
conducive to the sustained development of the national economy and o The acquisition of such equity/equities is subject to the prior approval of
the fiduciary nature of banking that requires high standards of integrity the Monetary Board which shall promulgate appropriate guidelines to
and performance. In furtherance thereof, the State shall promote and govern such investments
maintain a stable and efficient banking and financial system that is Equity Investments of a Universal Bank in Financial Allied Enterprises
globally competitive, dynamic and responsive to the demands of a o A Universal Bank can own up to 100% of the equity in a thrift bank, a
developing economy. rural bank, or a financial allied enterprise
o A publicly-listed universal or commercial bank may own up to 100% of
Q: What are the classes of banks? (CUT-RICO) the voting stock of only one other universal or commercial bank
1. Universal banks o The following are Financial Allied Undertakings (Manual of Regulations
2. Commercial Banks of Banks): (LBIF-CSS-FIHO)
3. Thrift Banks, composed of: Leasing companies including leasing of stalls and spaces in a
a. Savings and Mortgage banks, commercial establishment, provided, that bank investment in
b. Stock Savings and Loan Associations, and or acquisition of shares of such leasing company shall be
c. Private Development Banks as defined under the Thrift Banks Act limited/applicable only in cases of conversion of conversion of
or R.A. 7906 outstanding loan obligation into equity
4. Rural Banks as defined in the Rural Banks Act or R.A. 7353 Banks
5. Cooperative Banks as defined in the Corporation Code or R.A. 6938 Investment houses
6. Islamic Banks as defined in the Charter of Al Amanah Islamic Investment Bank Financing companies
of the Philippines or R.A. 6848 Credit Card companies
7. Other classifications of banks as determined by the Monetary Board of the Financial institutions catering to Small and Medium scale
BSP industries including Venture Capital Corporation (VCC)
Companies engaged in stock brokerage/securities dealership,
Q: What is a Universal Bank? and
Universal banks are large commercial banks licensed by the BSP to do both Companies engaged in foreign exchange dealership/brokerage
commercial and investment banking. Examples of Universal bank are BPI, Insurance companies
Philippine Bank of Commerce, and Landbank Holding company: provided that the investments of such
holding company are confined to the equities of allied
Q: What are the activities that a Universal Bank may exercise in? undertakings and/or non-allied undertaking of Universal
A Universal Bank shall have the authority to exercise: Banks allowed under BSP regulations.
1. Powers authorized for a commercial bank; The Monetary Board may declare such other activities as
2. Powers of an investment house as provided in existing laws; and financial allied undertakings of banks. The determination of
3. Power to invest in non-allied enterprises whether the corporation is engaged in a financial allied
Equity Investments of a Universal Bank Universal Bank may invest in the equities undertaking shall be based on its primary purpose as stated in
of (1) Allied and (2) Non-allied enterprises as may be determined by the Monetary its articles of incorporation and the volume of its business
Board. Equity Investments of a Universal Bank in Non-Financial Allied Enterprises a
o Allied enterprises may either be (1) Financial or (2) Non-Financial Universal Bank may own up to 100% of the equity in a non-financial allied
o Except as the Monetary Board may otherwise prescribe: enterprise. The following a Non-Finanical Allied Undertakings (Manual of
The total investment in equities of allied and non-allied Regulations of Banks): (WSS-MSIHD-SCO)
enterprises shall not exceed 50% of the net worth of the bank o Warehousing companies

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o Storage companies substitutes for purposes of relending or purchasing receivables and other
o Safety deposit box companies obligations
o Companies primarily engaged in the management of mutual funds but
not in the mutual funds themselves Q: What is a Commercial Bank?
o Management corporations engaged or to be engaged in an activity A commercial bank shall have, in addition to the general powers incident to
similar to the management of mutual funds corporations, all such powers as may be necessary to carry on the business of
o Companies engaged in providing computer services commercial banking such as: (DPDD-FC)
o Insurance agencies/brokerages o Accepting drafts and issuing letters of credit;
o Companies engaged in home building and home development o Discounting and negotiating promissory notes, drafts, bills of exchange,
o Companies providing drying and/or milling facilities for agricultural crops and other evidences of debt;
such as rice and corn o Accepting or creating demand deposits;
o Service bureaus, organized to perform for and in behalf of banks and o Receiving other types of deposits and deposit substitutes;
non-bank financial institutions the services allowed to be outsourced, o Buying and selling foreign exchange and gold or silver bullion; acquiring
provided, that data processing companies may be allowed to invest up marketable bonds and other debt securities; and
to 40% in the equity of service bureaus o Extending credit, subject to such rules as the Monetary Board may
o Philippine Clearing House Corporation (PCHC), Philippine Central promulgate.
Depository Inc., and Fixed Income exchange, and These rules may include the determination of bonds and
o Such other activities as the Monetary Board may declare as non- other debt securities eligible for investment, the maturities
financial allied undertakings of banks. Universal Banks may further and aggregate amount of such investment.
invest in health maintenance organization (HMOs)
Equity Investments of a Universal Bank in Non-Allied Enterprises the equity Q: What is a Rural Bank?
investments of a Universal Bank, or of its wholly or majority-owned subsidiaries, in Those that promote rural development. They are governed by the Rural Banks Act
a single non-allied enterprise shall not exceed 35% of the voting stock in that (RA 7353).
enterprise They can extend loan or advances to primarily meet the normal credit needs of
Investment in Non-allied or Non-related Undertakings Only Universal Banks may farmers, fishermen and their families owning or cultivating land dedicated to
invest in the equity of an enterprise engaged in non-allied or non-related activities. agricultural production as well as the normal credit needs of cooperatives and
The following are non-allied undertakings eligible for investment by Universal merchants.
Banks (Manual of Regulations of Banks): (PIFO) In areas where there are no government banks, rural banks may also deposit in
o Enterprises engaged in physically productive activities in agriculture, private banks more than the amount prescribed by Single Borrowers Limit subject
mining and quarrying, manufacturing, public utilities, construction, to Monetary Board regulations.
wholesale trade and community and social services following the
industrial groupings in the Philippine Standard Industrial Classification Q: What is a Thrift Bank?
(PSIC). Those that encourages the industry, frugality and accumulation of savings of the
o Industrial park projects and/or industrial estate developments public. They are governed by the Thrift Banks Act (RA 7906)
o Financial and commercial complex projects (including land development To make it within easy reach to the people the credit facilities at reasonable cost,
and buildings constructed thereon) arising from or in connection with Thrift Banks shall include: (1) savings and mortgage bank; (2) private
the Governments privatization program; and development banks; and (3) stock savings and loan associations organized under
o Such other broad categories as the Monetary Board may declare as existing laws
appropriate A thrift bank shall have the following powers:
Equity Investments in Quasi-Banks To promote competitive conditions in o (a) Accept savings and time deposits;
financial markets, the Monetary Board may further limit to 40% equity investments o (b) Open current or checking accounts: Provided, That the thrift bank
of a Universal Bank in quasi-banks. This rule shall also apply in the case of has net assets of at least P20,000,000 subject to such guidelines as may
commercial bank. Quasi-banks refer to entities engaged in the borrowing of funds be established by the Monetary Board; and shall be allowed to directly
through the issuance, or assignment with recourse or acceptance of deposit clear its demand deposit operations with BSP and PCHC;
o (c) Act as correspondent for other financial institutions;

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o (d) Act as collection agent for government entities, including but not o (5) To discount bills and promissory notes issued and drawn by
limited to, the Bureau of Internal Revenue, Social Security System, and cooperatives;
the Bureau of Customs; o (6) To issue negotiable instruments to facilitate the activities of
o (e) Act as official depository of national agencies and of municipal, city cooperatives;
or provincial funds in the municipality, city or province where the thrift o (7) To issue debentures subject to the approval of and under conditions
bank is located, subject to such guidelines as may be established by the and guarantees to be prescribed by the Government;
Monetary Board; o (8) To borrow money from banks and other financial institutions within
o (f) Rediscount paper with the Philippine National Bank, the Land Bank of the limit to be prescribed by the Central Bank; and
the Philippines, the Development Bank of the Philippines, and other o (9) To carry out all other functions as may be prescribed by the
government-owned or -controlled corporations. Said institutions shall Authority: Provided, That the performance of any banking function shall
specify the nature of paper deemed acceptable for rediscount, as well as be subject to prior approval by the Central Bank of the Philippines.
rediscounting rate to be charged by any of these institutions; and
o (g) Issue mortgage and chattel mortgage certificates, buy and sell them Q: What is an Islamic Bank?
for its own account or for the account of others, or accept and receive The Al-Amanah Islamic Investment Bank of the Philippines or Islamic Bank was
them in payment or as amortization of its loan. created to promote and accelerate socio-economic development in Autonomous
o (h) Purchase, hold and convey real estate under the same conditions as Region by performing banking, financing and investment operations and
those governing commercial banks; participate in agricultural, commercial, and industrial ventures based on Islamic
o (i) Engage in quasi-banking and money market operations; concept of banking. It is governed by RA 6848
o (j) Open domestic letters of credit; The Islamic Bank is subject to the principles and rulings of the Islamic Sharia.
o (k) Extend credit facilities to private and government employees;
o (l) Extend credit against the security of jewelry, precious stones and Other Banks (Government-owned banks):
articles of similar nature; and (m) Philippine Veterans Bank - a private commercial bank that is owned by veterans in
o Offer other banking services. which the law provides that it shall be a government depository as a gesture of
Thrift banks may perform the services under subsections (b), appreciation by a grateful nation to the veterans for the sacrifices they offered on
(d), (e), (g) and (i) only upon prior approval of the Monetary the altar of freedom. Governed by RA 3518.
Board. Land bank of the Philippines created to finance distribution of estate for division
and resale to small landholders as well as the purchase of the landholding by the
Q: What is a Cooperative Bank? agricultural lessee. Created by Agricultural Land Reform Code or RA 3844
Those organized by, the majority shares of which is owned and controlled, by Development Bank of Philippines created to provide credit facilities for
cooperatives, primarily to provide financial credit services to cooperatives. It shall development in agriculture, commerce and industry, and the reconstruction of
also include cooperative rural banks. They are governed by the Cooperative Code properties damaged by the war. DBP was the former Rehabilitation Finance
(RA 6938) Corporation created under R.A. 85.
Membership of a cooperative bank shall include only cooperatives and federations
of cooperatives. Non-stock savings and loan associations non- stock, non-profit corporation engaged in the
A cooperative bank may perform the following functions: accumulation of savings of its members and loans to members to service the needs of
o (1) To carry on banking and credit services for the cooperatives; households by providing long-term financing for home building and development and for
o (2) To receive financial aid or loans from the Government and the personal finance. Confines exclusive membership and cannot transact business with the
Central Bank of the Philippines for and in behalf of the cooperative general public.
banks and primary cooperatives and their federations engaged in
business and to supervise the lending and collection of loans; Quasi-banks entities engaged in borrowing of funds through issuance, endorsement, or
o (3) To mobilize savings of its members for the benefit of the cooperative assignment with recourse to acceptance of deposit substitutes for purpose of relending or
movement; purchasing receivables and other obligations.
o (4) To act as a balancing medium for the surplus funds of cooperatives
and their federations; Offshore Banks deals with transaction with foreign currencies involving the receiving of
funds from external sources and utilization of such funds. Governed by PD 1034.

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Under Section 16 of the GBL, (Fit and Proper Rule), the Monetary Board has the
Q: What are the Supervisory Powers of the Bangko Sentral? following powers :
Under Section 4, Chapter II (authority of the bangko sentral) of the GBL, The o To maintain the quality of bank management and afford better
operations and activities of banks shall be subject to supervision of the Bangko protection to depositors and the public in general the Monetary Board
Sentral. Supervision shall include the following: shall prescribe, pass upon and review the qualifications and
o The issuance of rules of, conduct or the establishment standards of disqualifications of individuals elected or appointed bank directors or
operation for uniform application to all institutions or functions covered, officers and disqualify those found unfit
taking into consideration the distinctive character of the operations of o After due notice to the board of directors of the bank, the Monetary
institutions and the substantive similarities of specific functions to which Board may disqualify, suspend or remove any bank director or officer
such rules, modes or standards are to be applied; who commits or omits an act which render him unfit for the position.
o The conduct of examination to determine compliance with laws and o In determining whether an individual is fit and proper to hold the
regulations if the circumstances so warrant as determined by the position of a director or officer of a bank, regard shall be given to his
Monetary Board; integrity, experience, education, training, and competence.
o Overseeing to ascertain that laws and regulations are complied with;
o Regular investigation which shall not be oftener than once a year from Q: What is the Bank of International Settlement (BIS)?
the last date of examination to determine whether an institution is Established on 17 May 1930, the Bank for International Settlements (BIS) is the
conducting its business on a safe or sound basis: Provided, That the world's oldest international financial organisation. The BIS has 60 member central
deficiencies/irregularities found by or discovered by an audit shall be banks. The head office is in Basel, Switzerland and there are two representative
immediately addressed; offices: in the Hong Kong Special Administrative Region of the People's Republic of
o Inquiring into the solvency and liquidity of the institution; or China and in Mexico City.
o Enforcing prompt corrective action. The BIS Mission Statement:
o The Bangko Sentral shall also have supervision over the operations of o aims at promoting monetary and financial stability;
and exercise regulatory powers over: o acts as a forum for discussion and cooperation among central banks and
quasi-banks, the financial community; and
trust entities and o acts as a bank to central banks and international organisations
other financial institutions which under special laws are
subject to Bangko Sentral supervision. Q: What is the role of the Bank of International Settlement (BIS)?
Under Section 5, (Policy Direction; Ratios, Ceilings and Limitations), the Bangko The mission of the BIS is to serve central banks in their pursuit of monetary and
Sentral shall provide policy direction in the areas of money, banking and credit. financial stability, to foster international cooperation in those areas and to act as a
o For this purpose, the Monetary Board may prescribe ratios, ceilings, bank for central banks.
limitations, or other forms of regulation on the different types of With regard to its banking activities, the customers of the BIS are central banks and
accounts and practices of banks and quasi-banks which shall, to the international organisations. As a bank, the BIS does not accept deposits from, or
extent feasible, conform to internationally accepted standards, including provide financial services to, private individuals or corporate entities.
of the Bank for International Settlements (BIS). BIS pursues its mission by:
o The Monetary Board may exempt particular categories of transactions o fostering discussion and facilitating collaboration among central banks;
from such ratios, ceilings, and limitations, but not limited to exceptional o supporting dialogue with other authorities that are responsible for
cases or to enable a bank or quasi-bank under rehabilitation or during a promoting financial stability;
merger or consolidation to continue in business, with safety to its o carrying out research and policy analysis on issues of relevance for
creditors, depositors and the general public. monetary and financial stability;
o acting as a prime counterparty for central banks in their financial
Q: What is the Monetary Board? transactions; and
The powers and functions of BSP shall be exercised by the Banko Sentral o serving as an agent or trustee in connection with international financial
Monetary Board. operations.

Q: What is the Fit and Proper Rule?

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Monetary and financial stability is a precondition for sustained economic growth Bank is organized 5-15 people (incorporators)
and prosperity. Reflecting the public good character of this goal, the BIS also makes Cooperatives may organized a rural bank upon consultation with the rural banks in
part of its work available free of charge to the wider public, including: the area
o its own analyses of monetary and financial stability issues; international Bank and its branches shall be treated as one unit
banking and financial statistics that underpin policymaking, academic Universal and commercial banks may open branches within or outside the
research and public debate Philippines upon prior approval of BS
Other banks shall be governed by their pertinent laws
Q: What does BSP Circular 280(2001) provide?
Covers only capital requirements for credit risks. Upon effectivity, the guidelines Q: Could bank acquire its own shares?
shall replace the existing provisions of Section X116 and its subsections of the Under Section 10, General Rule: NO GBL provides that NO bank shall: (1) Purchase
Manual of Regulations for Banks. or acquire shares of its own capital stock or (2) accept own shares as security for
Q: What are the minimum conditions for bank to be organized? Exception: if it approved by Monetary Board (The stock so purchases or acquired
Under Section 8 of the GBL: shall, within six months from the time of its purchase or acquisition, be sold or
o 1. Entity is a stock corporation (par value stocks only); disposed of at a public or private sale.)
o 2. Funds are obtained from the public which shall mean twenty persons Reason: if banks were allowed to have a lien in their own stocks for indebtedness
or more; of stockholders, prohibition against granting loans or discounts upon security
o 3. Minimum capital requirement prescribed by MB shall be satisfied would become ineffective

Q: What are the capital requirements to organize a bank? Q: How much shares can a foreign individual invest in a local bank?
TYPE OF BANK AMOUNT Old rule: Foreign stockholdings: Foreign individuals and non-banks can own 40% of
Universal 4,950 voting stock of domestic bank.(aggregate foreign voting stocks)
2,400 A Filipino individual and domestic nonbank may each own up to 40% of the voting
Commercial stock (no aggregate ceiling)

Thrift banks New Rule: RA 7721 allowed the entry of foreign banks either through ownership of
1. Head office in Manila 325 up to 60% of the voting stock of an existing domestic bank or of a new banking
2. Otherwise 52 subsidiary or establishment of branches with full banking authority.
Rural Banks (May naresearch ako na new rule) RA 10641(2015 lang to) now allows foreigners to
1. Within Manila 26 own up to 100% of domestic banks and facilitate the entry of established,
2. Cebu/Davao 13 reputable and financially sound foreign banks in the Philippines. It also granted
locally-incorporated subsidiaries of foreign banks the same banking privileges as
st nd 6.5
3. In 1 , 2 and 3rd class city and 1st class municipality domestic banks of the same category. The new law, Republic Act 10641 or An Act
Allowing the Full Entry of Foreign Banks in the Philippines, amends RA 7721, An
4. In 4th, 5th, and 6th class city and in 2nd, 3rd, and 4th class municipality 3.9
th th Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the
5. In 5 and 6 class municipality 2.6

At least 25% of total authorized capital stock shall be subscribed by subscribers of Q: Who is an independent director?
proposed bank
An "independent director" shall mean a person other than an officer or employee
25% of such subscription shall be paid-up. It shall not be less than the minimum
of the bank, its subsidiaries or affiliates or related interests. For every board of
capital requirement directors of a bank, there must be at least 2 independent directors.
Incorporators/subscribers and proposed directors and officers must be (2) persons Specifically, an independent director shall mean a person who
of integrity and (1) good credit standing
Is not or has not been an officer or employee of the bank or its
Such persons must (1) not be convicted of crime involving moral turpitude and (2)
subsidiaries or affiliates or related interests during the past 3 years
not officers of government agency or department charged with granting loans to
counted from the date of his election

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Is not a director or officer of the related companies of the institutions Stockholder stockholder of record in the books of the bank
majority stockholder Related interest includes souse or relative within 1st degree or by legal adoption.
Is not a majority shareholder of the institution, any of its related This includes partnership, co-ownership of DOSRIs
companies, or of its majority shareholder Corporations where the above mentioned owns 20% of subscribed capital, then
Is not a relative within the 4th civil degree of consanguinity or affinity, the prohibition shall apply
legitimate e or common- law of any director, officer or majority Can also be less than 50% if the DOS sits as representative of the bank in the board
shareholder of the bank/quasi-bank, trust entity, or any of its related of such corporation
companies Effect of violation: the director or officer who violates may be declared vacant and
Is not acting as a nominee or representative of a director or substantial subject to penal provisions of NCBA
shareholder of the bank/quasi-bank/trust entity o, any of its related
companies or any of its substantial shareholders Q: What is micro-financing under Central Bank Circular 272 of 2001?
Is free from any business or other relationship with the institution or any of its major Micro-financing loans are small loans granted to the basic sectors, as defined in the
stockholders which could materially interfere with the exercise of his judgment Social Reform and Poverty Alleviation Act of 1997 (Republic Act 8425), and other
loans granted to the poor and low-income households for their microenterprises
Q: What is the rule on Family Groups of Related Interests? and small businesses so as to enable them to raise their income levels and improve
Sec.12. Stockholdings of Family Groups of Related Interests. Stockholdings their living standards. These loans are granted on the basis of the borrowers cash
of individuals related to each other within the fourth degree of consanguinity flow and are typically unsecured.
or affinity, legitimate or common-law, shall be considered family groups or The maximum principal amount of microfinance loans shall not exceed
related interests and must be fully disclosed in all transactions by such P150,000. This is equivalent to the maximum capitalization of microenterprise
corporations or related groups of persons with the bank. under R.A. 8425.
Exception: appointive public official The schedule of loan amortization shall take into consideration the projected cash
flow of the borrowers which is adopted into the terms and conditions
Q: What is the rule on Single Borrowers Limit? formulated. Hence, microfinance loans may be amortized on a daily, weekly, bi-
The total amount of loans, credits accommodation and guarantees extended to monthly or monthly basis, depending on the cash flow conditions of the
any person, partnership or corporation shall not exceed 20% of net worth of bank borrowers.
In Circular 425 of 2004 of BSP, the SBL was increased to 25% Interest on such microfinancing loans shall be reasonable and just as may be
Exceptions to SBL: determined by management to be consistent with its credit policies. The interest
o 1. MB may otherwise prescribe for reasons of national interest rate shall not be lower than the prevailing market rates to enable the lending
o 2. Deposit of rural banks with GOC financial institutions such as LB, DBP institution to recover the financial and operational costs incidental to this type of
and PNB microfinance lending.
Basis for determining SBL is the total credit commitment of bank to borrower
Q: Can the bank acquire real estate?
Q: What is the Restriction on Bank Exposure to Directors, Officers, Stockholder and related Bank may acquire real estate as necessary for its conduct of business
interests (DOSRI) o Total investment on such real estate shall not exceed 50% of capital
No DOSRI can directly or indirectly borrow from such bank or become a guarantor, accounts
indorser or surety for loan o Equity investment of a bank in another corporation engaged in real
o MB can limit the valid loan given to DOSRI provided that it shall be based estate shall be considered part of investment in real estate
on their unencumbered deposits and book value of their paid in capital In determining compliance with the ceiling, the following shall apply
contribution o Investment shall include real estate and equipment necessary for bank
Exception is when there is a written approval of the majority of all directors of the use such as bank premises and real property of bank under its name
bank excluding the DOSRI concerned o The cost of real estate leased by bank from corporation and amount of
Such approval is not required if it is under a fringe benefit plan approved by BSP equity in lessor shall also be included
Directors include those named in incorporations, elected or filledOfficers shall In the case of Tala vs. Banco Filipino, BF reached its maximum 50% capacity in real
include any person who performs function of management estate and Tala was created by major stockholders to buy back sites of BF and
leases it back to them. However, BF defaulted and Tala wants the payment of

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rents. The court ruled that Tala cannot be allowed to collect rent as it clearly shows currency deposits of a foreigner who was convicted of crime of rape may be
that the tried to circumvent the real estate investment limit in GBL garnished to satisfy judgment.
Acquisition of real estate by way of satisfaction of claims Graft and Corruption - Under RA 1405 and Anti-Money Laundering Act, the secrecy
o Notwithstanding the limitations, bank may still acquire the following of deposits do not apply. Cases of unexplained with are similar to bribery and
property: dereliction od duty and there is no reason why these 2 classes of cases cannot be
1. Mortgage to it in good faith for security excepted from the rule making bank deposits confidential.
2. Conveyed for satisfaction of debt Authority to Inquire into Bank Deposits under the AMLA The Anti Money
3. Purchase under judgement or mortgage laundering Council may inquire into or examine any particular deposit or
o Any real property held in such circumstance must be disposed within 5 investment with any bank of financial institution upon order of any competent
years court in cases of violations where it is established:
o After said period, those properties shall now be included in the 50% o There is probable cause that the deposits or investments are related to
limitation an unlawful activity; or
o A money laundering offense
Q: What is the Confidentiality Rule on bank deposits? Periodic or Special examination - BSP can also inquire into deposits for periodic and
The Secrecy of Bank Deposits or R.A. 1405 was created for the following purposes: special examinations
(1) To give encouragement to the people to deposit their money in banking In camera inspection by the Ombudsman The Ombudsman has the In-Camera
institution and Inspection power to look into deposits provided that
(2) discourage private hoarding of depositors so that could be used in economic o There is a pending case is court;
development o The account must be properly identified
Absolute Confidentiality All deposits of whatever nature with banks or banking o Inspection limited to the subject matter
institutions including investment bonds are considered absolutely confidential and o The bank personnel and the account holder must be notified to be
may not be examined, inquired or looked into by any person, government officials, present during inspection; and
bureau, or office. It shall be unlawful for any official or employee of banking o Such inspection may cover only the account identified in the pending
institution to disclose any information concerning deposits case
Preliminary Attachment
Q: What are the exceptions to Secrecy of Deposits? Disclosure of Dormant Accounts
GR: Prohibition against inquiry into or disclosure of deposits R.A. 8367 (An act Authority of the Commissioner of Internal Revenue to inquire can into deposits
regulating of the organization and operation of non-stock savings and loan (1) to determine gross estate of a decedent or (2) when he has applied for
associations) prohibits the inquiry or disclosure of deposits compromise tax liability
o Exceptions: (1) Written permission of depositor; (2) Impeachment cases;
(3) Order of court in case of bribery or dereliction or (4) Subject matter Cases:
of litigation SIMEX CASE. Diligence required
It shall also apply to Foreign Currency Deposits with the only exception of written UCPB vs. Ramos
permission. BPI vs. Ramos
In Islamic banks that the only exceptions are: (1) inspection of bank auditor, (2) PNB vs. SMC
written permission by depositor (3) subject matter of litigation
Garnishment In the Rules of Court, accounts can be garnished to insure BANKING LEGALIZED LEAKAGE 1
satisfaction of judgment as there is no real inquiry and some disclosure are merely
incidental. The reason is that the Congress has not intended for debtors to escape PART I
by converting their assets to cash and depositing the same in a bank.
Secrecy and exemption from attachment and garnishment of Foreign Currency Q: What are the kinds of credit transactions that banks are related to?
Deposits cannot be used as a device for wrongdoing the general exemption (1) Secured these are borrowings with hard assets to back up the loan. Banks
against garnishment shall not apply to foreign transients, otherwise injustice would adopt the KYC principle or the Know Your Customer principle when granting loans
result especially to a citizen aggrieved by a foreign guest. In one case, a foreign and other credit accommodation. It must first ascertain the identity of the

Nudibranch 7

borrower and that he is capable of fulfilling his commitment to the bank. The Rural banks are those banks which cater to small - medium enterprises by
following are the kinds of securities: extending small loans to its borrowers. The borrowers are usually fisherman and
o Guaranty this is simply a document executed by a Guarantor who farmers. For instance, a farmer will borrow money from the bank and will
assures that the Debtor (borrower of the bank) is of good moral mortgage his farmland. If he fails to pay, the bank will foreclose the mortgage and
character. In a Guaranty, there is the so-called benefit of Excussion his farmland will be sold at public auction wherein the property will be sold to the
which protects the guarantor so that the lender can only run after the highest bidder. In the event that no one bids or the highest bid is too low, the
guarantor after he has first exhausted all the properties of the debtor bank will be forced to buy the farmland and the property will now be known as
(guarantor becomes liable when the debtor CANNOT pay); ROPOA or Real and Other Property Owned and Acquired. However, the bank has
o Surety - this makes the Borrower together with the Surety both co- little use for ROPOA since it makes its money by lending money with interest to the
makers or principal debtors of the loan. The surety must be a very good public. The bank thrives on loans and not on ROPOA.
friend of the borrower to make himself a principal debtor in the loan.
Usually, banks enter into surety only with respect to credit card Q: What are the incentives given by the Monetary Board to the banks which buy a bank
transactions. (surety is liable when the debtor DOES NOT pay). that is in the precarious situation and is on the verge of collapse?
o Mortgage and Pledge - With respect to big loans, the bank must be Many rural banks are on the verge of collapse because these banks that are
secured and backed up by a mortgage or pledge. Basically, the situated in the province are exposed to disasters and typhoons. When a bank is in
mortgaged property need not be in the possession of the creditor while destress, there are repercussions to other banks or even the whole banking
the pledge needs to be in the possession of the creditor. Another community. Therefore, the BSP must now intervene. The reason is that the banking
distinction is that a pledge can later be sold by the creditor in case of system is impressed with public interest. The effects of bankruptcy spread like
non-payment. wildfire. When a bank becomes bankrupt, all the others are affected. For instance
o In all dealings with Real Property especially in the execution of a real when Banco Filipino collapsed due to rumors that it was bankrupt which prompted
estate mortgage, there is a requirement that the mortgagee must show depositors to withdraw all their money, BPI bought Banco Filipino and put up a
proof that he is the true owner by showing his title. Since a Transfer bank which is now known as BPI Family Savings Bank.
Certificate of Title (TCT) is only a duplicate, the bank must inquire One incentive is in the form of tax exemptions. Merger and consolidation is made
further by going to the Registry of Deeds and requesting for a copy of tax free
the Original Certificate of Title (OCT). It must check if the title is clean, The BSP has recently issued a new circular creating The Consolidated Program for
meaning that it is free from any adverse claim, encumbrance, tax lien (a Rural Banks (CPRB) was conceptualized to strengthen rural banks that play a major
lien is basically a charge on the property itself), etc. If the buyer of a role in financial inclusion.
property that has title with an annotation to it, then he is deemed the o The CPRB aims to promote mergers and consolidations among rural
successor-in-interest of all the debts that may be enforced by the claims banks to bring about a less fragmented banking system by enabling
annotated in the title. The reason is that registration in the Torrens them to improve financial strength, enhance viability, strengthen
System is deemed notice to the whole world. For instance, when one is management and governance, and expand market reach, among others.
applying for a housing loan, the usual question to be asked are: Where is o Starting this month (Aug. 2015), the two-year program is offering
the collateral located? Where is the TCT? Where is the letter of financial and regulatory perks to groups of rural banks serving similar
guarantee? areas to combine operations and create larger, more efficient
o If the loan is not paid by the borrower, then the bank will have the right institutions.
to foreclose the mortgage. It will be sold in public auction and the o Qualified banks will be entitled to financial advisory services to be
property will be sold to the highest bidder. The proceeds of the sale will funded through the Countryside Financial Institutions Enhancement
be applied to the unpaid loan. Before the sale, however, the borrower Program (CFIEP) that has set aside P25 million for the CPRB.
still has the right to redeem is property within 1 year after the sale of the o The CFIEP will also finance business process improvement such as
property integration process, development and updating of manuals, and
(2) Unsecured - these are borrowings with hard assets to back up the loan guidance on automation. It will also provide capacity building support,
including training and governance.
Q: What are rural banks and what are the loans and credit accommodations are they o The BSP, PDIC, and Land Bank will subsidize 80% of the financial advisory
interested in? cost for banks.

Nudibranch 8

o The new incentive program also provides possible equity participation

by Land Bank. Q: What are the functions that could be outsourced away? Who is a 3rd party provider?
o The central bank would also observe full flexibility in granting regulatory Outsourcing shall refer to any contractual arrangement between a bank and a
and other incentives allowable under existing banking laws and qualified 3rd party service provider for the latter to perform designated activities on
regulations. a continuing basis on behalf of the bank. Generally, outsourcing is allowed EXCEPT
if it involves the servicing or the handling o bank deposits or inherent banking
Q: What are the BSPs implementation of the Bank of International Settlements functions and other functions determined by the Monetary Board.
recommendations Banks may outsource all information technology systems and processes except for
BIS issues recommendations on banking laws and regulation, such as Basel II. Basel inherent banking functions Consultant/service providers may be engaged o provide
II provides for Minimum Capital Requirements, Supervisory Review Process, and assistance/support to the bank personnel assigned to perform such functions
Market Discipline. To address these, The Bangko Sentral ng Pilipinas has issued Banks may outsource data imaging, storage, retrieval and other related system;
circulars to adopt these recommendation. We are currently implementing Tier Two Clearing and processing of checks (except those within the PCHC); and such other
supplementary capital in relation to the payment of interest. The monetary board activities determined by the Monetary Board
has the authority to license capital requirements and track record of the officers Banks may outsource credit card services, printing of bank loan statements, and
(Fit and Proper rule) other non-deposit records; processing of export import and other trading
transactions; property management services; messenger, courier services; security
Q: What are the rules on DOSRI? What is the purpose? guard services; vehicle services; janitorial services; public relations; legal services
Banks are not allowed to grant loans to relatives of the DOSRI unless passed by the Under Section 55 of the GBL, outsourcing of inherent banking function is a
banks Board of Directors. This is to avoid them from getting preferential treatment. prohibited practice.
The money in the bank is owned by the depositor and should be treated with
meticulous care. The banks are the vanguard/watchdog of the money of the
depositors. PART II

Q: What is the purpose of the Secrecy of Bank Deposits under RA 1405? Q: What is the nature of the banking business?
People are afraid that others will know that they have money. The rule of non- The relationship between the bank and the depositor is one of debtor and creditor.
disclosure of any data relating to the depositors account seeks toe encourage Bank is the debtor, the creditor is the depositor. The banking law governs and the
people to deposit their money in banks. civil code applies suppletorily. Since law should be taken in pare material, all laws
should be taken into consideration. If one law does not provide for application of a
Q: Explain the authority of the BIR to look into bank accounts. certain contingency, then other laws should be resorted to.
The exceptions, among others, of the Secrecy of bank deposits are written consent, The contract between the bank and the depositor is governed by the provisions of
court order, AMLA, anti-graft and corrupt practices act, including BIRs authority to the Civil Code on simple loan. The depositor lends the bank money with interest
look into bank account and the bank agrees to pay the depositor on demand.
The BIR engages in operation RIP which is the looking into a deceaseds records Bank deposits are in the nature of irregular deposits. However, banks do not
and accounts. Reason: all transfers are taxable. The property to be inherited by the accept deposits to enrich depositors but to earn money for themselves
heirs are subject to tax, so that the death of a person becomes a tax event. Any
transfer is subject to tax including the transfer of property to heirs which is called Q: What is the degree of diligence required to be exercised by banks?
Estate Tax which is taxed at 20%. The government is the so-called special The banks should take meticulous care of the accounts of its depositors always
extraordinary heir of the testator. The BIR is now very happy. There can be no having mind the fiduciary nature of their relationship.
distribution to even to compulsory heirs without tax clearance. Banks must assume a degree of diligence higher than that of a good father of a
How will the BIR find out of the death of a taxpayer? Look into the records of family extraordinary diligence.
crematorium, moratorium, insurance companies, etc. The BIR officer does not In Simex vs. C.A., the SC held: In every case, the depositor expects the bank to treat
need a court order to look into records. The BIR has its own authority since it is a his account with the utmost fidelity, whether such account consists only of a few
quasi-judicial body. What the officer needs to do is merely to show his i.d. The hundred pesos or of millions. The bank must record every single transaction
privilege of secrecy of bank deposits is only good when the taxpayer is alive. When accurately, down to the last centavo, and as promptly as possible. This has to be
he is dead, it shall be subject to scrutiny of the BIR for estate taxes done if the account is to reflect at any given time the amount of money the

Nudibranch 9

depositor can dispose of as he sees fit, confident that the bank will deliver it as and Section 97 of the Tax Code provides: Payment of Tax Antecedent to the Transfer of
to whomever he directs. A blunder on the part of the bank, such as the dishonor of Shares, Bonds or Rights. Donations inter vivos or mortis causa, legacy or
a check without good reason, can cause the depositor not a little embarrassment if inheritance, cannot be effective unless a certification from the Commissioner that
not also financial loss and perhaps even civil and criminal litigation. estate taxes have been paid.
The banking business is impressed with public interest. Lawyers should know the If a bank has knowledge of the death of a person, who maintained a bank deposit
Manual of Regulation of Banks to know whether a violation thereof has been account alone, or jointly with another, it shall not allow any withdrawal from the
committed. said deposit account, unless the Commissioner has certified that the estate taxes
imposed have been paid.
Q: What is LAIF or loan against insufficient fund? When the bank is of the knowledge of the death of a depositor, it will freeze his
account, meaning that no funds may be withdrawn from the account. Reason: the
Q: Can the bank be held liable for a violation of B.P. 22? Commissioner of the BIR is running after persons with and/or account who intend
B.P. 22 punishes any person who makes or draws and issues any check to apply on to avoid estate tax. The bank shall be held criminally liable once it is discovered
account or for value, knowing at the time of issue that he does not have sufficient that the bank is in collusion with the heirs without the necessary clearance.
funds in or credit with the drawee bank. There is no need to prove the act beyond
reasonable doubt. The law is malum prohibitum. Q: Explain interest imposed by banks.
Problem: A depositor opened a combo account which is links a Checking and A borrower earns interest against his bank account even if only minimal. Then the
Savings account wherein Savings account will supply the necessary funds to be paid banks earn by extending loans with high interest rates. The usury law is now in
against the Checking account. Sometimes it is the bank tellers fault in the transfer moratorium, meaning it is in limbo. Because of the volatility of rates of exchange of
of funds so that a violation of BP22 is committed. However, the bank cannot be money, it is hard to determine what is a reasonable rate of interest. What the law
held liable. disallows is a rate is unconscionable, that is shocking to the conscience. The legal
rate of interest now is 6% per annum. The Bankers Association of the Philippines
Q: What is a survivorship agreement? can set standards as to the rate of interest of banks. What is the recourse when the
There is survivorship agreement when joint (and several) owners of a deposit agree rate of interest is to high? File a case with the supreme court.
that either of them could withdraw any part or whole of account during the
lifetime of both and the balance upon death of either belongs to the survivor. A Q: Can a bank engaged in Trust operations? Explain.
join account (and/or account) is subject to survivorship agreement Yes, a bank has the authority to engage in trust business.
It is an aleatory contract. Under the Civil Code: Trust business any activity resulting in trustor- trustee relationship involving
Art. 2010. By an aleatory contract, one of the parties or both reciprocally bind appointment of a trustee by a trustor for the administration, holding, management
themselves to give or to do something in consideration of what the other shall give of funds or properties of trustor by the trustee. It is for the use, benefit or
or do upon the happening of an event which is uncertain, or which is to occur at an advantage of the trustor or other beneficiaries. Trust entity shall administer the
indeterminate time funds or property under its custody with diligence that a prudent man would
Survivorship agreement is per se not contrary to law but it may be violative of law exercise.
if it is a mere cloak to hide an Inofficious donation, to transfer property in fraud of Trust entity stock corporation or person authorized by Monetary Board to
creditors, or to defeat a legitime of a forced heir, it may be assailed and annulled engage in trust business shall act as trustee or administer any trust or hold
upon such grounds. property in trust
Is a joint account allowed such as between husband/wife? For instance when the No trust entity shall for the account of the trustor or beneficiary,
husband dies the money will go to the wife? o 1. purchase, acquire, sell, property
o 2. transfer or purchase money or debt instruments from/to DORSI of
Q: Explain Survivorship in relationship to the imposition of estate tax trust entity and relatives of first civil degree
A survivorship agreement is valid and binding between the joint depositors but it o 3. unless authorized by the trustor after prior full disclosure of
has an effect of a gift or donation morits causa made by the deceased co-depositor transaction
during his lifetime made effective upon death because the acquisition by the Registration of articles of incorporation and by-laws of trust entity
survivor of the share of the decedent in the joint account is considered to be o SEC shall not register such unless accompanied by certificate of authority
acquired by bequest and hence subject to estate tax. from BSP. A trust business shall start from the moment their articles of
incorporations are registered.

Nudibranch 10

A bank has a separate corporate existence from a trust entity. Bank must have a
license from the Monetary Board. What are the requisites to this license? Unibanks Q: What are the functions and responsibilities of BSP?
automatically can engaged in trust operation. Why is it significant if a bank is a 1. To provide policy directions in the areas of money, banking and credit;
trust entity: it will be closely monitored by the BSP. 2. To regulate the operations of finance companies and non-bank financial institutions
A person never dies, meaning that when a person has a physical death, a new performing quasi-banking functions, and similar institutions;
personality is created which is called the estate where all his properties and rights 3. Custodian of reserves;
are held before distribution. The BSP makes sure that a bank is a qualified to be in 4. Clearing channel or house, especially where the PCHC does not operate;
a trusteeship since it is a fiduciary relationship. The trustor-trustee relationship is 5. Money function it shall have the sole power and authority to issue currency within
for wealth creation. The trustee will ask the trustor what he wants to do with his the Philippine territory;
money. That will depends upon the risk appetite of the trustor: does he want to 6. To engage in open market operations - purchase and sale securities exclusively in
invest his money in the money market? Or want only to keep it in trust to be accordance with price stability objective;
released periodically to a beneficiary. Wealth risk. Fixed Income Fund. Trust fee 7. To act as the banker and financial adviser of the government;
compensation given to the trustee. Insurance trustee. Licensed trustee. In case a. Designated as the official depositary of the Government, its political
something happens to the trustor what will the trustee do? There can be a subdivisions and instrumentalities and shall represent all it in all monetary fund
declaration of trust with the bank wherein the trustor instruct that his children will dealings;
be given pocket muna before they reach the age of 18. b. Before undertaking any credit operation abroad, the Government, through the
Secretary of Finance, shall request the opinion, in writing, of the MB on the
GBL monetary implications of the contemplated actions;
BIS c. The President may contract or guarantee foreign loans but with the prior
Cases concurrence of the MB;
Everything about Unibank d. To engage the services of other banking institutions to act as its agent.
Survivorship Agreement ~ Section 97 of tax code 8. To act as agent of the Government, its instrumentalities and subdivisions in the
RA 1405 and its exceptions. issuance of securities representing the obligations of the Government, its
SBL instrumentalities and subdivisions.
DOSRI 9. Source of credit; to make discounts, loans, and advances to banking and other
Outsourcing financial institutions to influence the volume of credit consistent with price stability
Confidentiality rule objectives.
Memorize the Financial Allied, Non-financial allied, and the non-allied enterprises 10. Supervisor of the banking system BSP shall have supervision over the operations of
and the exercise of regulatory powers over:
BANKING LEGALIZED LEAKAGE 2 a. banking institutions, including their subsidiaries and affiliates engaged in allied
New Central Bank Act R.A. 9763 b. quasi-banks;
Chapters 7 and 8 c. trust entities;
d. other financial institutions which under special laws are subject to BSP
Q: What is the declared state policy of BSP? supervision.
The State shall maintain a central monetary authority that shall function and
operate as an independent and accountable body corporate in the discharge of its Q: What are the corporate powers of the BSP?
mandated responsibility concerning money, banking, and credit. Corporate powers of the BSP (SCP-SPAL)
1. Adopt, alter and use a corporate seal which shall be judicially noticed;
Q: What are the primary objectives of BSP? 2. Enter into contracts;
(1) To maintain price stability conducive to a balanced and sustainable growth of 3. Lease or own personal and real property;
the economy; and 4. Sue and be sued;
(2) To promote and maintain monetary stability and the convertibility of the peso. 5. Do and perform all things that may be necessary or proper to carry out the
o BSP has supervision over all banks. It is the watchdog or the vanguard of purposes of the NCBA;
the depositors. 6. Acquire and hold assets and liabilities;

Nudibranch 11

7. Compromise, condone, or release, in whole or in part, any claim of or settled

liability to the BSP. Powers
1. Issue rules and regulations it considers necessary for the discharge of its
Q: What is the Monetary Board? Composition? Qualifications? Term? Powers? responsibilities and exercise of its powers
The MB is autonomous because it is composed of 5 private persons except for the o Rules and regulation issued shall be reported to President and Congress
Governor who is a department head and one member who is cabinet member within 15 days from date of issuance
Monetary board is the body through which the powers and functions of the Banko 2. Direct the management, operation and administration of BPS, reorganize its
Sentral are exercised personal and issue rules and regulations
Composition: o Legal units of BSP shall be under exclusive control and supervision of MB
o MB shall be composed of 7 members appointed by President with term 3. Establish human resource management system which shall govern selection,
of 6 years; hiring, appointment or dismissal of personnel.
The seven members are: o Compensation structure based on job evaluation studies and wage
1. The governor who shall be the chairman of MB. The Governor shall be head of a surveys shall be the integral component of the HR program
department and his appointment confirmation of Commision on Appoinments o MB shall make its own system which conform closely to RA 6758
o Whenever unable to attend board meeting, deputy governor shall act as (Compensation and Position Classification Act of 1989)
alternate o Those under salary grade 19 shall have rates under RA 6758
o MB shall designate one of its members as acting chair o Upon recommendation of governor, appoint, fix remunerations and
2. Member of cabinet designated by President removal personnel subject to civil service law
o Whenever cabinet member unable to attend meeting, the In CB Employees Association vs. BSP, the Court ruled that the establishment of
undersecretary shall be the alternate unfair human resource management is unconstitutional. It shown that higher
3. 5 members who shall come from private sector serving full-time grades receive greater benefits withheld from lower grades.
o In the first appointments from effectivity of act, 3 members shall serve 6
years while the other 2 members shall serve 3 years Rank and file employees are limited to SSL while employees in higher rank are
Qualifications: given higher compensation to entice them to stay. It is the rank and file
1. Natural born citizens employees that are of need for greater benefits
2. At least 35 years of age, Governor must be 40 years old
3. Good moral character 4. Adopt annual budget for and authorize expenditure by BSP
4. Integrity 5. Indemnify its members against all costs and expenses incurred in connection
5. Probity and patriotism with civil or criminal suit by reason of performance of duty unless liable for
6. Recognized competence in social and economic disciplines negligence or misconduct
a. In event of settlement or compromise, indemnification are covered
Disqualification of MB members provided that there is no negligence
1. Disqualification under RA 6713 (Code of Conduct and ethical standards of public b. Costs and expenses incurred in defending may be paid in advance and
officer and employees) repay the amount advanced should it be determined that personnel is
2. Disqualified from being a DOSRI of any bank subject to the supervision or not entitled to indemnity
examination of BSP
a. In which case, such member shall resign before assumption of office Q: What is Receivership? Conservatorship?
3. Member of MB coming from private sector shall not hold public office in tenure Conservatorship Receivership
4. No person shall be member if he has been connected directly with any Appointed for 1 year to take charge of the Equivalent to an injunction to restrain the
multilateral banking institution or has substantial interest on any private bank 1 assets, liabilities and the management of a bank in anyway. Thus, the appointment of a
year prior appointment (After an officer of a bank leaves the bank, can he work for bank or quasi-bank in a state of continuing receiver operates to suspend the authority of
the BSP? Not immediately because there is a term that should be followed. The inability or unwillingness to maintain a the bank and of its directors and officers
reason is to avoid undue influence) condition of liquidity. over its property and effects.
5. No member shall be employed in any such institution within 2 year after
expiration of term except when serving as representative of government (Sec. 9)

Nudibranch 12

Grounds: Grounds: liquidation

Whenever the MB finds the bank in a state 1. Unable to pay liabilities that are due. This *MB has the EXCLUSIVE power to designate The receiver shall file ex parte with RTC a
of: shall not include inability to pay cause by a conservator petition for assistance in the liquidation of
1. Continuing inability or extraordinarily demands by financial panic the bank pursuant to liquidation plan of PDIC
2. Unwillingness to maintain a condition of 2. Insufficient realizable assets Designation of conservator is not Effects: Effects of receivership
liquidity deemed adequate to protect 3. Cannot continue business without precondition to 1. Retention of juridical personality
depositors and creditors involving probable loss to depositors or designation of receiver There shall be retention of judicial
creditors personality even though it is ordered closed
4. Wilfully violated cease and desist order Termination of Conservatorship by MB
involving transactions of fraud MB shall terminate the conservatorship is it The suing must be done through the
5. In case a bank notifies BSP or public is satisfied that bank can continue liquidator
announces bank holiday where it suspends operations
payment of its deposit liabilities continuously Conservatorship can also be terminated on 2. Not liable to pay interest
for more than 30 days basis of report of conservator or its own Banks declared insolvent and ordered
findings would involve loss closed by BSP cannot be held liable to pay
In such as case, there shall be receivership interest
Powers of Conservator: Duties of a Receiver or liquidation When bank is closed, it cannot lend money,
1. Take charge of assets, liabilities and Receiver shall immediately: Period of conservatorship shall not exceed 1 engage in transactions or any banking
management thereof 1. Take charge of all assets and liabilities year activities
2. Reorganize management 2. Administer the same for benefit of where it can derive income from
In conservatorship, the banking functions
3. Collect monies and debs due creditors Thus there is no way the bank can pay the
4. Exercise all powers necessary to restore 3. Exercise general power of receiver under interest the accrues in favour of its
unlike in receivership and liquidation
viability ROC depositors

4. Shall not pay or any act that involves However, there are two types of deposits

Conservator shall report to MB and shall transfer of asset of bank that earn interest. The first one, deposit that

have the power to overrule or revoke actions Receiver may deposit or place funds of bank earn from the existence until the bank cease

of previous management innon-speculative investments to operate. This one must be paid. The
Receiver shall determine within 90 days second interest earned from the time the
Power of conservator cannot impair from takeover, whether institution may be bank closed until payment of deposits. The
obligations of rehabilitated or otherwise interest here must not be paid
The MB can summarily and without need of 3. Assets deemed under Custodia Legis
prior hearing forbid the institution from Assets if the bank becomes beyond its
doing business and designate PDIC as control. Receiver operates to suspend the
receiver authority of the bank to its properties
Assets of bank shall be custodia legis in
For quasi-banks any persons recognize in hands of receiver and exempted from
competence in banking may be designated garnishment, levy,
as attachment
receiver Liquidator task is to dispose all assets of
Qualifications of Conservator: When institution cannot be rehabilitated: the bank and effect partial payments of
Conservator must be competent and If receiver determines that bank cannot be banks
knowledgeable in bank operations and rehabilitated, MB shall notify the board of obligations
management directors that it shall proceed with

Nudibranch 13

4. Stay of execution - Banco Filipino Case. When a bank is guilty of violating SBL and DOSRI rules and
Stay of execution is warrant if bank is other bank regulations, this will lead to Bank run and Behest Loan
under receivershipTo execute a judgment Q: What is the Close Now, Hear Later scheme?
against a bank under receivership would The law does not require prior notice and hearing before a bank may be directed
unduly deplete its assets to the to stop operations and be placed under receivership. Since there is a requirement
prejudice of depositors and creditors that a case must be filed within 10 days after the receiver takes charge of the
banks assets, it then follows that the actions of the receiver which are being
5. Restriction of banks capacity to Act assailed must come before the actual filing of the case.
Insolvency of bank restricts its capacity to There is no law requiring prior hearing on the correctness of the Monetary Boards
act order to close a bank by stopping operations and proceed to liquidation. The
Bank cannot make new business such as reason is that the remedy of subsequent judicial review is available
accept new deposits or grant loans. But Opportunity to be heard and present evidence is not dispensed with because
receiver must collect debts in favour of the resort may be head to judicial review within 10 days from the date that the
bank that will form part on bank asset receiver takes charge of the banks assets.
Foreclosure falls within board definition of The purpose is to prevent the dissipation of the banks assets. It is a valid exercise
doing business of police power to protect the depositors, creditors, stockholders, and public in
Doing business - continuity of commercial general. Otherwise if hearing were a prerequisite, there will be panic and hysteria
dealings and arrangements incident to object among the public as well as the consequence of bank runs
organization Q: What is the PDICs role in assisting the BSP in receivership of a bank?
However, it shall not be included in those Act as a receiver: Whenever it is appropriate for the Monetary Board to appoint a
act receiver, the Monetary Board shall give prior notice and appoint PDIC as receiver.
prohibited from doing business It shall control, manage and administer the affairs of the closed bank. It shall
Thus even if there is receivership or exercise such powers and functions of a receiver under existing laws, as well as
liquidation, the period of prescription to bringing suits to enforce liability of closed banks, hire and terminate deputies and
foreclose continues to run assistants, collect loans and other claims, hire counsel, etc.
In BF vs. Ybanez, the court ruled that Settle insurance claims: Whenever an insured bank shall have been closed by the
receiver can still collect interest on loans Monetary Board, payment of the insured deposits shall be made by PDIC as soon
during period of closure as possible either by: (1) cash, or (2) making a transferred deposit in another
6. Exercise of jurisdiction of liquidation court insured bank. An insured deposit means the amount due to any depositor for
All claims of bank must be filed in BSP deposits in an insured bank at the time of closure, but not exceeding P500,000.
It is to prevent multiplicity of against bank
Exclusive jurisdiction of liquidation court Q: What are the incentives given by the Monetary Board to the banks which buy a bank
pertains only to adjudication claims against that is in the precarious situation and is on the verge of collapse?
bank and does not cover reverse situation Rural banks are those banks which cater to small - medium enterprises by
Not necessary that claim is initially disputed extending small loans to its borrowers. The borrowers are usually fisherman and
before it is filed farmers. Many rural banks are on the verge of collapse because these banks that
In Ong vs. CA, if buyer bought a property are situated in the province are exposed to disasters and typhoons. Also, many
from the bank who is already declared officers of rural bank commit violations such as DOSRI and SBL violations. That is
insolvent, sale is void why big banks which are financially sound are given incentives when the buy such
rural banks on the verge of collapse.
- when banks are in distress, BSP steps in to control the situation. The reason for Some incentives include: the temporary lifting of the ratios required by BSP. These
BSPs interest on banks in distress is because a fire in one bank will be contagious ratios such as the asset-net worth ratio are important for the liquidity of a bank.
to other banks and affect the banking system Another is tax incentives through tax exemptions so that BSP and BIR also work

Nudibranch 14

together. Merger (between big bank and rural bank) and consolidation (among The purpose of this is to make banks more vigilant
rural banks similarly situated) is made tax free. An exemption is the act of filing by the BSP examiner that banks did not comply
The BSP has recently issued a new circular creating The Consolidated Program for with the regulations
Rural Banks (CPRB) was conceptualized to strengthen rural banks that play a major This is why banks must always have good PR with the BSP examiner. BSP examiners
role in financial inclusion. are more strict than BIR examiners because they take note of even the minor
o The CPRB aims to promote mergers and consolidations among rural violations.
banks to bring about a less fragmented banking system by enabling
them to improve financial strength, enhance viability, strengthen Q: What are Bank Reserves?
management and governance, and expand market reach, among others. Bank reserves are banks' holdings of deposits in accounts with the central
o Starting this month (Aug. 2015), the two-year program is offering bank. Some central banks set minimum reserve requirements, which require banks
financial and regulatory perks to groups of rural banks serving similar to hold deposits at the central bank equivalent to at least a specified percentage of
areas to combine operations and create larger, more efficient their liabilities such as customer deposits.
institutions. DOMESTIC RESERVES:
o Qualified banks will be entitled to financial advisory services to be o In order to control the volume of money created by the credit
funded through the Countryside Financial Institutions Enhancement operations of the banking system, all banks operating in the Philippines
Program (CFIEP) that has set aside P25 million for the CPRB. shall be required to maintain reserve against their deposit liabilities:
o The CFIEP will also finance business process improvement such as provided that the Monetary Board may, in its discretion, also require all
integration process, development and updating of manuals, and banks to maintain reserves against funds held in trust and liabilities for
guidance on automation. It will also provide capacity building support, deposit substitutes under the NCBA.
including training and governance. o The required reserves of each bank shall be proportional to the volume
o The BSP, PDIC, and Land Bank will subsidize 80% of the financial advisory of its deposit liabilities and shall ordinarily take the form of a deposit in
cost for banks. the BSP. Reserve requirements shall be applied to all banks of the same
o The new incentive program also provides possible equity participation category uniformly and without discrimination
by Land Bank. o Since the requirement to maintain banks reserves is imposed primarily
o The central bank would also observe full flexibility in granting regulatory to control the volume of money, the BSP shall not pay interest on the
and other incentives allowable under existing banking laws and reserves made with it unless the MB decides otherwise
regulations. o The MB may fix the minimum reserve ratios to peso deposits and
deposit substitutes which shall be maintained by all banks uniformly of
Q: Explain BSPs authority to examine books of account of banks. the same category
The BSPs supervising and examining department head or his deputy shall examine o In case of reserve deficiency, the bank shall pay the BSP 1/10th of 1% per
the books of every banking institution once in every 12 months and at such other day on the amount of the deficiency. If it chronically has a reserve
times as the Monetary Board shall deem necessary by an affirmative vote of 5 deficiency, the monetary board may limit or prohibit the making of new
members and to make a report on the same. There shall be an interval of at least loans or investments by the institution and may require that part or all
12 months between annual examinations of the net profits of the institution be assigned to surplus
The bank shall afford full opportunity to examine its books, cash, and available INTERNATIONAL RESEVES:
assets and general condition at any time during banking hours when requested to o In order to maintain international stability and convertibility to
do so by BSP. None of the reports and other papers relative to the examinations Philippine peso, the BSP shall maintain international reserves adequate
shall be open by inspection to the public unless publicity is incidental or is to meet any foreseeable net demands on the BSP for foreign currencies
necessary for the prosecution of violations in connection with the business of such o In judging the adequacy of the international reserves, the MB shall be
institution guided by the prospective receipts and payments of foreign exchange by
When banks do not comply, you call that exemption. If the non-compliance is not the Philippines
duly explained, there will be a penalty (either a monetary sanction or an officer o International Reserves may include
may be suspended or even dismissed). It is the legal departments job to justify it is Gold
not an exemption (for instance, because of a storm, there was a problem in Assets in foreign currencies

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o Whenever the international stability of the Peso is threatened since the

international reserve falls to a level which is inadequate to meet Chapter 9
prospective net demands on the BSP for foreign currencies, the MB shall
take remedial measures which are appropriate and within their powers. Q: Who is an entrustor? What is his obligation? Who is an entrustee? What is his
o In order to achieve the primary objective of price stability, the MB shall obligation? What is a trust receipt?
rely on its moral influence and the powers granted to it under the NCBA Trust receipts written or printed document signed by the entrustee in favor of
for the management of monetary aggregates. the entruster containing terms and conditions substantially complying with the
Why is money a medium of exchange? Because money is backed up by bank provisions of the Trust Receipts Law
reserves. If you recall during the Japanese occupation we have the mickey mouse Entruster-person holding the title over the goods, documents, or instruments
money since the puppet government produces so much money even if they are subject of a trust receipt and any successor-in-interest of such person
not backed up by reserves. The requirement for reserves is the reason why all gold Entrustee-person having or taking possession of goods, documents, or instruments
must be sold to the BSP. Gold and foreign money are the reserves which are in the under a trust receipt transaction, and any successor-in-interest of such person for
BSP the purpose specified in the trust receipt agreement.
o Obligation of entrustee:
BANKING SHORLISTED QUESTIONS 2 1. Hold the goods in trust for the entruster and dispose of them
strictly in accordance with the terms of the rust receipt
TRUST RECEIPTS Chapter 3 2. Receive the proceeds in trust for the entruster and turn over the
same to the entruster
A banks function in a trust receipt transaction is to issue Letters of Credit (they serve as 3. Insure the goods for their total value against loss and other
guaranties by the bank) for individuals/entities who wish to import or export or buy goods casualties
abroad. 4. Keep goods separate and capable of identification as property of
Example: BPI issues a letter of credit through its international operations department in favor 5. Return the goods in the event of a non-sale or demand of the
of an importer who wants to buy equipment abroad after the importer looked into the entruster
specifications, details, price and the information of a supplier of such equipment in Rome, 6. 6. Observe all other terms and conditions of the trust receipt
Italy. The importer does not want to fly all the way to Italy so instead he seeks the help of BPI Bank acquires security interest in the goods.
by applying for a letter of credit. After BPI has reviewed the details of the equipment that the Emphasis on the word trust. The bank will issue only in favor of valued clients. So
importer wishes to purchase, it will approve his application and will process the letter of if there is no valued client, there is no trust. The trust receipt is important in import
credit, which is a guaranty by the bank that the importer is a client of BPI. BPI will first issue a transactions.
Draft, which is an evidence of indebtedness just like a promissory note. This is sent to a
correspondent of the bank. In the case of BPI, its correspondence in Italy is Citibank. BPI will Q: What is the independence principle? (independence as to the transactions)
inform Citibank that it has a client who is interested in buying equipment with citing the Independence Principle assures the seller of prompt payment, independent of
specifications. Citibank will now look for the supplier in Rome and advise the supplier to any breach of the main sales contract.
deliver the equipment to the importer. Now upon delivery, the importer will not get the
equipment right away. BPI will have initial custody and be the temporary owner of the Q: In these transactions, what is the role of the Monetary Board? What is BSPs function?
equipment, which will be under BPIs name in the meantime. BPI will issue first a Trust Policy
Receipt to the supplier which shall be cancelled only upon payment by the importer. If the 1. To encourage and promote the use of trust receipts as an additional and
importer does not pay, he can be charged with the crime of Estafa under Article 315 of the convenient aid to commerce and trade
Revised Penal Code. The equipment is still under the name of the bank, but the importer can 2. Provide for regulation of trust receipts transactions in order to assure the
now use the equipment temporarily because of the trust receipt. In this transaction, the bank protection of the rights and enforcement of obligations of the parties
intermediate so that the supplier does not have to go through the trouble of going all the way involved therein
to Rome to buy the equipment 3. Declare the misuse of goods or proceeds realized from the sale as a criminal
offense ESTAFA

Chapter 8 Legal Tender Violation of Trust Receipts Law

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Although is it malum prohibitum, the intent to misuse or misappropriate the goods depositor has already abandoned his account and the same will now be subject to
should be proved. Because the Law punishes the dishonesty and abuse of confidence. escheat on the basis that the government owns everything.

Penalty Escheat - special proceedings
Failure of Entrustee to turn over proceeds of the sale of goods covered by the trust
receipt shall constitute the crime of ESTAFA. Demand drafts cannot be escheated but telegraphic notes can be escheated


All things even those belonging to persons are owned by the State. (I.e. In wills and R.A. 9302
succession, when a person has no heirs, his property will revert back to the Stat through Purpose: to give peace of mind to the depositors, the PDIC is the GOCC which
escheat proceedings; In the Real Property Tax Code, when there is a property where there is safeguards the interest of the depositor
no known owner Applies only to DEPOSITS
The nature of an insurance contract is to damnify a person for risk insured
There are persons who have deposits in the custody of banks have a Creditor-Debtor When the bank closes, the depositor will be indemnified an initial amount of up to
relationship with the bank on the expectation that they can withdraw their money later on 500,000 for his deposit. He will then wait for the full liquidation of the bank (which
depending if it is a savings or a time deposit account. usually takes a longer time) before claiming for the amount of his deposit
exceeding 500,000
The unclaimed deposits law contemplates a situation wherein according to the accounts
records, the deposits are not moving. These are called Dormant accounts. If more than 1 Q: What are the powers of PDIC as a corporate Body?
year passes without the depositor withdrawing or depositing, a service charge will now be (1) to adopt and use a corporate seal
charged by the bank since it is acting now as a custodian. (2) to have succession until dissolved by an Act of Congress
(3) to make contracts
There is a presumption in law that if the account is not moving, then the bank takes initiative (4) to sue and be sued, complain and defend, in any court of law in the Phil.
in informing the depositor that has not been moved for almost 10 years. a. all suits of civil nature to which the corporation shall be part shall deemed to
BPIs policy is that when there is only 6 months left before the expiration of the 10 arise under the laws of the Philippines.
year period, then it will send letters to the last known address of the depositor. If b. no attachment or execution shall be issued against PDIC or its property before
there is no reply, it will send about 3-4 advises. If there is still no reply, then the final judgment in any suit, action or proceeding in any court
bank will find ways of skip tracing, meaning it will outsource the services of a c. The Board of Directors shall designate an agent upon whom service of process
specialist to locate the depositor with the end view of finding out whether the may be made in any province or city jurisdiction in which any insured bank is
depositor is still alive? Where is he? If the bank still has no information of the located
depositor, it will compile all the Negative Communications. The Manual of (5) to appoint its board of directors such officers and employees as are not otherwise
Regulation require it to state its efforts exerted to locate the depositor. The bank provided by the law to define their duties, fix their compensation, require bonds of
will come up with a report (usually signed by the VP) and submit the same to the them and fix penalty thereof and to dismiss such officers and employees for cause
BSP. (6) to prescribe by laws not inconsistent with law
The BSP will now review the same with the presumption that the depositor really (7) to exercise all powers specifically granted by law
cannot be located and that he has abandoned the account. BSP is like a professor (8) to conduct examination of banks
in examining whether the bank has exerted all efforts so it must be meticulous. It (9) act as a receiver
must observe the requirements under the Manual of Regulations. When the BSP is (10) to prescribe such rules and regulations as it may deem necessary to carry out the
finally convinced, it will institute thru its legal department Escheat Proceedings provisions of the PDIC law.
filed with the Solicitor General. (11) PDIC may establish its own provident fund which shall consist of contributions
The reason why this situation arises after 10 year is because under civil law the made both by it and by its officers and employees to a common fund for the payment of
prescriptive rules usually is 10 years before a party will be barred. The debtor- benefits to such officers
creditor relationship cannot be used as a defense here anymore since the

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(12) to compromise, condone or release in whole or in part, any claim or settled liability - Appoint or hire persons to perform such powers and functions of PDIC as receiver
to PDIC regardless of the amount involved. or liquidator of the closed bank
- Suspend or terminate the employment of officers and employees of
Deposit insurance coverage - the closed bank
(A) Deposit Liabilities
i. deposit liabilities of any bank or banking institution which is engaged in the business of Composition
receiving shall be insured with the PDIC . (1) Secretary of finance ex officio chairman w/o compensation
ii. factors considered (2) governor of BSP ex officio member of the Board w/o compensation
- Financial history and condition of the bank - Adequacy of its capital structure (3) President of PDIC appointed by the president of the Philippines for a term of
- Future earning prospects 6years shall also serve as Vice Chairman of the Board
- General character of its management (4) 2 members from the private sector for 6 years w/o reappointment by the President
- Convenience and needs of the community to be served by the bank and whether or Disqualification of Appointive members disqualified from holding any office, position,
not its corporate powers are within the purposes of the PDIC or employment in any insured bank
- The term deposit, unpaid balance of money or its equivalent received by a bank in its
usual course of business and for which it has given or its obliged to give credit Manner of Payment
(B) Statutory Liability of PDIC a. Payment of the insured deposits made by PDIC
- PDIC governed primarily by the provisions of the special law creating it. The liability of the i. By cash
PDIC for insured deposits therefore is statutory and such liability rests upon the existence of ii. By making available to each depositor a transferred deposit in another insured
deposits with the insured bank. bank in an amount equal to insured deposit of such depositor
b. transfer deposit means a deposit in an insured bank made available to a depositor
PDICs as a receiver or liquidator of banks. by PDIC as payment of insured deposit of such depositor in a closed bank and assumed
PDIC and BSP have close coordination since BSP is in a better position to know the by another insured bank
position and financial standing of the bank c. Joint account insured separately from any individually-owned deposit account
As receiver, it will get rid of all officers and will appoint its own personnel d. Account held jointly by 2 or more natural persons, or by 2 or more juridical persons or
It will do everything to rehabilitate the bank. The PDIC is the new captain entities, the maximum insured deposit shall be divided into as many equal shares as
Behest loan money of a bank is given out whose security is doctored such as there are individuals, unless a diff. sharing is stipulated in the document of deposit
when the property is valued. Behest loans, DOSRI, and SBL violations makes the e. Account held by a juridical person or entity jointly the maximum insured
bank insolvent. deposit shall be presumed to belong entirely to such juridical person or
A. Appointment PDIC as receiver f. Aggregate of the interests maximum insured deposit of PhP 500,000
- b. receiver includes a receiver, commission, person or other agency charged by
law with the duty to take charge of the assets and liabilities of a bank which has Q: How are premiums paid?
been forbidden from doing business The bank pays the assessment
B. Powers
- Control, manage and administer the affairs of the closed bank Close now, hear later scheme
- Powers, functions and duties, as well as all allowances, remunerations and This is one of the instances wherein Due Process is inferior. Receiver will first be
perquisites of the directors, officers, and stockholders of such bank are suspended appointed and hearing on the propriety of the appointment need not be
entertained immediately. The purpose is to prevent further loss of the bank
- Provisions of the Articles of Incorporation are deemed suspended
- Assets deemed in custodial egis in the hands of the receiver Q: What if a person has 2 or more accounts in one bank?
- From the time the closed bank is placed under such receivership, assets shall not They will be considered as 1 account. There is no splitting of deposits. The number
be subject to attachment, garnishment, execution, levy or any court processes. of accounts a single person has is detectible since the banks maximize the use of
In addition to the powers of a receiver, PDIC is empowered to: technology and have electronic records.
- Bring suit to enforce liabilities to or recoveries of the closed bank
Foreign Currency Deposits

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They are covered under the PDIC law purpose is to prevent dirty money from being sanitized due to deposit. Another
The foreign currency deposit unit license of the bank will be checked way to sanitize dirty money is to set up a corporation
GR: only peso deposit are insured against
EXPN: foreign currency deposit Money Laundering
However, offshore banking units is not covered by the PDIC law have no presence A crime whereby the proceeds of an unlawful activity are transacted thereby making them
in the Philippines appear to have originated from legitimate sources.

Q: What are NOT covered by the PDIC? Policies of AMLA
Quasi-banking activities 1. Protect and preserve integrity and confidentiality of bank accounts
Deposit substitutes (other form of borrowing from the public) 2. Ensure that Philippines shall no be used as money laundering site
Mutual Fund 3. Extend cooperation in transnational investigations and prosecutions
Trust agreement
3 Steps of accomplishing:
Q: What gives comfort to depositors if the transaction cannot be covered under PDIC? 1. Placement inserts money into a legitimate financial institutions
Trust entities, licensing, track record, requirement of bond, close monitoring for 2. Layering sending money through various financial transactions to change its form
breaches 3. Integration money re-enters the mainstream economy in legitimate-looking form

Under the Civil Code Safe harbor doctrine
Article 2241-2242 provides for enumeration as to concurrence and preference of A safe harbor is a provision of a statute or a regulation that specifies that certain
credit when a person is in a state of insolvency conduct will be deemed not to violate a given rule (immunity from suit
Financial Rehabilitation and Insolvency Act (FRIA) of 2010 enforces the PDIC No administrative, criminal or civil proceedings, shall lie against any person for
Article 2244. All payments to insured transactions are similar to taxes in that if having made a covered transaction report OR A SUSPICIOUS transaction report in
after liquidation of assets and liabilities of a person or entity, these transactions the regular performance of his duties and in good faith, whether or not such
will be paid first since they are preferred over others reporting results in any criminal prosecution under this Act or any other Philippine
When the PDIC pays the depositor, PDIC is subrogated to all rights of the depositor. Institutions Covered
It steps into the shoes of the depositor 1. Banks and other institutions supervised and regulated by BSP
2. Insurance Committees
TRO and Injunction 3. Securities, dealers, etc.
No court, except the CA, shall issue any TRO, preliminary injunction or preliminary 4. Mutual funds, common-trust funds and other similar entities
mandatory injunction against PDIC 5. Foreign Exchange corporations and other similar entities
SC may issue a restraining order or injunction when the matter is of extreme 6. Entities administering or dealing with currencies regulated by SEC
urgency involving a constitutional issue BSP will wile with the CA petition to freeze an account
Any restraining order or injunction issued in violation of the foregoing is void
Covered Suspicious Transactions
ANTI-MONEY LAUNDERING ACT 1. Cash or equivalent monetary instrument exceeding P500,000 within 1 banking day
R.A. 9194 2. Regardless of amount:
What prompted the enactment of AMLA? Due to the proliferation of so many dirty Unlawful Activities
money coming from dubious sources such as kidnapping, illegal drug transactions, No underlying legal or trade obligation
piracy, plunder Client is not properly identified
In order to detect the commission of illicit acts, when a person deposits amount of Amount is not commensurate with business or financial capacity of client
more than 500,000, the bank will conduct an interview of a depositor as to where Clients transaction is structured in order to avoid being subject of reporting
he got the money. It will then report to the Anti-Money Laundering Council. The requirements
Deviation from the profile of the client and/or clients past transactions with institution

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Transaction is related to an unlawful activity -Authority to Inquire Bank Deposits: to complete legal measures to prevent money
laundering, the AMLC may inquire into or examine any particular deposit or investment with
AMLC Composition any banking institution or non-bank financial institution upon order of any competent court
1. Governor of BSP Chairman incases of violation, it must be established that:
2. Commissioner of Insurance Commission member 1. There is probable cause that deposits are related to unlawful activity or Money laundering
3. Chairman of SEC - member offense
Any analogous transactions

Freezing of Monetary Instrument or Property
The CA upon application ex parte by AMLC after determination of probable cause
Freeze period shall be for 20 days unless extended by the court

BSP circular 706
establish guidelines implementation of anti-money laundering in relation to
terrorist financing

Basic Principles and Policies to Combat Money Laundering - in line with the declaration of
policy, covered institutions shall apply the following principles:
1. Conduct business in conformity with high ethical standards in order to protect
its safety and soundness as well as the integrity of the national banking and
financial system:
2. Know sufficiently your customer at all times and ensure that the financially or
socially disadvantaged are not denied access to financial services while at the same
time prevent suspicious individuals or entities from opening or maintaining an
account or transacting with the covered institution by himself or otherwise
3. Adopt and effectively implement a sound AML and terrorist financing risk
management system that identifies, assesses, monitors and controls risks
associated with money laundering and terrorist financing;
4. Comply fully with these rules and existing laws aimed at combating money
laundering and terrorist financing by making sure that officers and employee are
aware of their respective responsibilities and carry them out in accordance with
superior and principled culture of compliance; and
5. Fully cooperate with Anti-Money Laundering Council (AMLC) for the effective
implementation and enforcement of the AMLA

Compliance office
Management of the implementation of the covered institution's Money Laundering and
Terrorist Financing Prevention Program (MLPP) shall be a primary task of the Compliance
Office. To ensure the independence of the Office, it shall have a direct reporting line to the
Board of Directors or any Board-level or approved committee on all matters related to AML
and terrorist financing compliance and their risk management

AMLA is an exception to the secrecy of bank deposit act

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